SPR authorization, fossil fuel research in pending spending measure

Maureen Lorenzetti
Washington Editor

WASHINGTON, DC, Jan. 27 -- Congress last week moved closer to completing a long-delayed federal budget for fiscal year 2003, with the US Senate passing a $390 billion appropriations bill Jan 23.

The House and Senate must now reconcile two different spending proposals and settle on a final "omnibus" bill that sets spending levels for most federal agencies through Sept. 30. So far it is unclear what, if anything, would provoke a White House veto.

Included in the bill are annual budgets for key agencies that regulate oil and gas companies, large and small. This includes the budgets for the departments of Interior and Energy, the Environmental Protection Agency, and operating funds for the Federal Energy Regulatory Commission and the Securities and Exchange Commission.

Senators considered more than 200 amendments to the measure, which combines 11 of the 13 annual appropriations bills that fund the federal government. Two military spending bills passed Congress and were signed into law last year.

Senators approved by voice vote a plan by Sen. Jeff Bingaman (D-NM) that gives the president permanent authority to draw down the Strategic Petroleum Reserve in case of an emergency. Congress typically reauthorizes the president's ability to use the SPR every 2 years, but a possible war with Iraq and the current supply woes from Venezuela justified giving the president permanent authority, bill sponsors said. The amendment also directs the Department of Energy to fill the reserve to capacity, even if Congress chooses to expand the stockpile beyond its current 700 million bbl limit. The proposal is expected to win support from the House and the White House.

Senators also approved by voice vote an amendment sponsored by Alaska Sens. Lisa Murkowski (R) and Ted Stevens (R) allowing the Department of the Interior to renew the right-of-way for the Trans-Alaska Pipeline without extensive environmental reviews.

Even with the new Republican majority, the Senate remains opposed to most offshore oil drilling as evidenced by two measures now in the bill. Mike DeWine and George Voinovich, both Republicans from Ohio, sponsored a largely symbolic measure that extends a 2-year ban on drilling in the Great Lakes. Similarly, Sen. Barbara Boxer (D-Calif.) won support for nonbinding language that calls on Interior not to spend staff resources related to the exploration or development of 36 disputed leases off California. The state wants the federal government to buy back the leases.

But that interest in supporting so-called "green" issues extended only so far. Senators narrowly defeated a measure by a 50-46 vote offered by Sen. John Edwards (D-NC). That measure sought to delay an EPA proposal that streamlines a permitting provision of the Clean Air Act called "new source review." NSR is supposed to ensure power generators and refiners do not create more industrial pollution when they expand operations.

Environmental groups, which oppose EPA's plan, said the close vote means there could be pressure on senators to consider the issue again.

Another pending clean air item already in the Senate bill would require EPA to submit a report no later than Feb. 15, 2004 "on the practices and procedures by which states develop separate emission standards, including standards for nonroad engines or vehicles, as compared to the development by EPA of national emission standards under the Clean Air Act."

Opponents of the language say the measure would require EPA to perform legal work that industries could use to attack state pollution control standards. Industry proponents say the study would help EPA be more efficient in its enforcement of clean air rules on a state-by state-basis.

Negotiations ahead
Key policy issues regarding environmental enforcement, research, and taxes still await further debate before a final bill is sent to the White House for approval.

Funding in the $390 billion Senate-passed package is subject to a 2.9% across-the-board cut in all domestic programs, a figure likely to be challenged during conference negotiations. Those negotiations could stretch out through next month depending on what the White House is willing to accept.

Meanwhile, the White House unveils a proposed 2004 budget Feb. 3. Bush administration officials said in mid-January that the new budget seeks to increase most domestic spending by 4%, an increase of less than half of what Congress is expected to pass for the 2003 budget. Both White House and congressional officials predict there could be serious cuts in some government programs in order to help pay for increased military spending and a proposed economic stimulus package that includes deep tax cuts ($674 billion over 10 years).

Oil and gas casualties
One casualty could be oil and gas research, some industry sources predicted. Even before budget deficits were considered a problem, this White House has historically proposed dramatic cuts in the Department of Energy's fossil fuel office.

This year, with oil prices at relatively high levels, there may not be as much political will in Congress to ignore the White House's wishes on the issue, congressional staff said.

Pending 2003 issues
Under consideration in the pending omnibus bill are a myriad of spending items that impact industry directly and indirectly. These include earmarks for federally funded oil and gas research programs, environmental protection enforcement, and money to process leasing applications. Funds to inventory the oil and gas potential of federal land may also be included.

Some producers also would like to see the "Section 29" tax credit renewed. That tax incentive began in 1980 to encourage unconventional oil and gas domestic production. The comprehensive energy bill that failed last year included an extension; it is uncertain whether the tax credit will be included in this bill.

Also typically in the annual federal budget are public policy mandates: Congress this year is again expected to impose a 1-year moratorium on most offshore drilling, for example.

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